Foreign Direct Investment Essay Example | Topics and Well Written Essays - 2000 words

Foreign Direct Investment - sample ExampleIn essence, FDI gives the investor the power to operate a comp both in another country for the recollective term. Developed innkeeper countries be not too welcome to the idea on the premise that they business organisation foreign firms will end up dominating their local firms. In contrast to this, developing countries atomic number 18 more welcome to the idea on the grounds that FDI will bring additional capital, expertise and fresh technology into their country. (Contessi & Weinberger, 2009). Host countries record FDI flows as liabilities along with similar items in their balance of payments. In host countries like these FDI flows make up a large percentage of the total investment in the frugality as comp ared to more developed countries the solvents of FDI on these countries differ as well, with developing countries showing a steady growth trend as compared to developed countries who showed boom and bust cycles as a top of engaging in FDI. (Contessi & Weinberger, 2009). Growth is normally measured by looking at the trends in per capita gross domestic product growth. Analysts relate FDI to per capita to GDP growth by looking at figures of gross FDI inflows and FDI inflows per capita to see if they pay any impact on the frugal growth of a country. Research has revealed a convinced(p) relationship betwixt FDI levels and growth levels in an economy, in some cases these results have been insignificant as well scarcely these variables have never shared a negative relationship. Extraneous variable have a magnitude changing effect on this relationship. It has been seen that, the more developed a country is, the better and greater positive effect FDI will have on its economic growth. (Contessi & Weinberger, 2009). Most studies that have analyzed the impact of FDI on the economic growth of the host country have appoint the results to be pretty elusive. Most established relationships are based specifically on the host countrys own specific economic characteristics. olibanum it is difficult to generalize these effects and apply them to other countries as the findings of a study. However, the probable effects are not completely elusive, as the endogenous growth theory provides framework for the positive linkage betwixt growth and FDI inflows. (Johnson, 2005). A study found that FDI can have a positive effect on growth, given that the host country promotes exports simultaneously. (Balasubramanyam et al, 1996). Another study showed that FDI had a positive impact on growth, but this effect was to be directly proportional to the host countrys level and quality of gay capital. (Borensztein et al, 1998). A further study conducted on 50 developed and developing countries also found FDI to be positively impacting host countrys growth rate. (Olofsdotter, 1998). Research revealed that FDI and growth have a positive relationship, the magnitude of which depends on the specific economic conditions of t he country in question. (Zhang, 2001). Another study based on research on Latin American countries also had similar findings. (Bengoa & Sanchez-Robles, 2003). Some studies on the other hand, found a weak link between FDI and economic growth based on research through on a mix of developed and developing countries. (De Mello, 1999). Other studies, like the one which conducted research on a mix of 72 developing and developed countries found that FDI